Appeal No.	 EAT/689/97

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 24 February 1998

Before
HIS HONOUR JUDGE H J BYRT QC
MR D J HODGKINS CB
MR R JACKSON

MR A HUDSON	APPELLANT

ADDISON ENGINEERING SUPPORT SERVICES LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR A BEANEY
(Representative)	
For the Respondents	MR N GRUNDY
(of Counsel)
Roland Robinson and Fentons
Solicitors
335 Red Bank Road
Bispham
Blackpool
FY2 0HW	

	JUDGE BYRT QC:	This is an appeal against a decision of an Industrial Tribunal sitting in Manchester. Its decision was promulgated on 8th May 1997, and by that decision it declared that Mr Hudson was not an employee of the respondent Company, and therefore, his claim for unfair dismissal was rejected.

	Mr Hudson now appeals.

	The background facts of the case are as follows. The respondents are a company running an employment agency supplying contract employees to a variety of corporate customers. Mr Hudson, to use a neutral term, was engaged by the respondents in about May 1993 and continued working for the respondents until the August of 1996, when the arrangement with the respondents was terminated.

	As Mr Beaney told us, Mr Hudson’s employment was originally for six months only, but by agreement that was extended for some 39 months. During that time Mr Hudson was employed at Hillhouse side, a site belonging to ICI, and he was there employed as a technical clerk in the building design office. As the Industrial Tribunal found in its extended reasons, Mr Hudson made very clear to the respondents at the outset that he would not want to treated as a subcontractor, but would want to be treated as an employee. Indeed, as the reasons of the Industrial Tribunal state, he insisted upon that position. However, there was no written contract between Mr Hudson and the respondents. There was a written contract between the respondents and ICI relating to the terms and conditions upon which they took on hired employees. There is another finding of the Industrial Tribunal that the terms of such an agreement were not known to Mr Hudson.

	Whilst Mr Hudson worked at the Hillhouse site, he was paid for fixed hours, a fixed weekly wage which was calculated on an hourly basis. The respondents exercised no day to day control over him, nor did they have any set disciplinary procedures to which Mr Hudson was amenable. The Industrial Tribunal in their reasons, go on to say that day to day control and indeed discipline by them of Mr Hudson would have been inappropriate having regard to the terms of the contract between the respondents and ICI.

	In addition to that, the Industrial Tribunal noted that Mr Hudson was never entitled to sick pay, nor was he entitled to holiday pay nor was there any arrangements for the accrual of holiday pay entitlement. Equally so, the respondents did not pay him for Bank Holidays or statutory holidays. What happened was that ICI used to pay the respondents for the services of Mr Hudson on those occasions, and the respondents used to pass on the payments to Mr Hudson. Lastly, the Industrial Tribunal noted that Mr Hudson was not entitled to any pension arrangements.

	The arrangement or engagement continued until 12th August 1996. On that date ICI gave Mr Hudson one week’s notice terminating his services. That was what they were entitled to do under their contract with the respondents. Mr Hudson was not certain what was happening, and as a result he contacted a Mr Bonney of the respondent Company in order to ascertain whether ICI was entitled to do that. Mr Bonney was not sure; he had to check up too, and on 14th August intimated to Mr Hudson that ICI had in fact indicated that they wished to get rid of his services and accordingly his contract would be at an end. After that, the respondents did what they could to find Mr Hudson replacement employment.

	Against that background picture, the Industrial Tribunal assessed those factors which pointed in favour of Mr Hudson being an employee; those which pointed against him being an employee; and those factors which were purely neutral. So far as the factors which were neutral is concerned, they came to the conclusion that the fact he was paid no pension was not indicative either way, and nor was the fact that he was paid with a deduction of Income Tax and National Insurance contributions. The reason for that is that whenever dealing with people under contract with employment agencies, the Inland Revenue look to the employment agencies for the deductions.

	The Industrial Tribunal found as indicative of the fact that he was an employee the fact he was paid a regular weekly wage at a fixed rate of remuneration for fixed weekly hours. But thereafter they came to findings about a number of factors which they thought were indicative that Mr Hudson was self-employed. They made reference to the fact that day to day control was given to ICI. All their sickness reporting procedures required Mr Hudson to report to ICI. They observed that there were no grievance or disciplinary procedures in the arrangements between Mr Hudson and themselves. He would have to report either to ICI or the respondents in respect of such matters and the Industrial Tribunal noted that this was an unusual and inappropriate option where a person was said to be an employed person. They also noted that there were no holiday pay arrangements; that he was not entitled to receive sick pay; and he was only entitled to one week’s notice. They say that an employee, if he were an employee, would have been entitled to one week’s notice for each year served. In this case, something like three week’s notice would have been his entitlement. 

	Thereafter, they weighed up the pros and the cons, and came to the conclusion that, on balance, Mr Hudson was not an employee of the respondent Company. 

	Mr Beaney has appeared on behalf of Mr Hudson before this tribunal, as indeed he did before the Industrial Tribunal. His main points are that the Industrial Tribunal just failed to take into account all the relevant factors. He says that Mr Hudson’s clear insistence that he should be treated as an employee, meant in effect that there was an express oral agreement that he was an employed person, and that there was no indication by the findings of the Industrial Tribunal or anywhere else, that the respondents had refuted that suggestion, although they would have had ample opportunity of doing so. He referred this tribunal to the case of Massey v Crown Life Assurance Co [1978] IRLR 31, at page 33, he drew are attention to paragraph 13, where the Master of the Rolls said this:

“... On the other hand, their relationship is ambiguous as is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true legal relationship between them. ...”

A little later at paragraph 16 he said:

	“So the way in which they draw up their agreement and express it may be a very important factor in defining what the true relationship was between them. If they declared that he is self-employed, that may be decisive.”

Lawton LJ, who was a member of that Court, said this:

“It clearly established that the parties cannot change a status merely by putting a new label on it. But if in all the circumstances of the case, including the terms of the agreement, it is manifest that there was an intention to change status, then in my judgment there is no reason why the parties should not be allowed to make the change.”

	In addition to those submissions Mr Beaney drew our attention to a letter written by the respondents, undated, but I think its contents make plain it was written about 1994, addressed to “TO WHOM IT MAY CONCERN” and in that letter they said this, referring to Mr Andrew Hudson:

“THE ABOVE NAMED IS EMPLOYED AS A TECHNICAL CLERK WITH ADDISON ENGINEERING SUPPORT SERVICES & HAS HELD THIS POSITION FOR THE PAST TWELVE MONTHS. DURING THIS PERIOD HE HAS PROVED TO BE AN HONEST & TRUSTWORTHY EMPLOYEE”

Mr Beaney says that whilst taking into account the various factors which counted in favour of Mr Hudson being an employee, the Industrial Tribunal made no reference to that significant letter. He then went on, and concluded his submissions by criticising the various points set out in paragraphs 6(i) to (v)which the Industrial Tribunal thought signified that Mr Hudson was not an employee. He said that they had less significance than the Industrial Tribunal attributed to them. He said the factors there were dictated by the practicalities of the situation, rather than being indicative or determinant of the relationship between Mr Hudson and the respondents. He said that if the Industrial Tribunal had carried out its balancing procedures correctly, it may well be that they should have come to a different conclusion.

	Mr Grundy for the respondents recognised the Industrial Tribunals have a difficult task when assessing whether a person is an employed person or a self-employed person. He said that the Industrial Tribunal who had to determine such a matter had to undertake a delicate balancing of the various factors which give an indication one way or the other. He said that, at the end of the day, having made an assessment of which way the various factors point, they have to stand back and make a decision on the overall position. He referred us to the authority of Hall v Lorimer [1994] IRLR 171 which recommended that approach.

	He submitted that, judging by their reasons, the Industrial Tribunal had carried out their duties conscientiously, and no possible criticism could or should be made of the balancing which the Industrial Tribunal had undertaken. In as tactful way, as he could, he stressed that it was not for this tribunal, to substitute its views for those of the Industrial Tribunal, bearing in mind that the factors the tribunal had to come to a decision about were essentially questions of fact or fact and law. Overall, he submitted, it was apparent that the Industrial Tribunal had directed themselves correctly, and therefore, this tribunal should not interfere.

	In coming to our decision, we would echo the observations made by Mr Grundy. This type of case presents any court, whether it be in this jurisdiction or another, with considerable difficulty. On a review, it ill-behoved a tribunal like this to scan the reasons of the court or the tribunal below as if with a fine tooth-comb, to find an error of law. Much less should we undertake the balancing act of the sort the Industrial Tribunal has conducted to see if they came to the right decision. They have heard the evidence and we did not. But there are a couple of factors which cause concern in this particular case.

	We accept Mr Beaney’s submission that it is apparent the Industrial Tribunal seemed to have taken no account of the letter that I have referred to, dated 1994, written I understand for the purposes of Mr Hudson securing a mortgage. But that in itself is not critical or crucial at the end of the day. In our judgment what is much more important, is that the Industrial Tribunal made no finding of fact about the important matrix of events which led to the conclusion of the initial agreement between Mr Hudson and the respondents. Clearly there was no express written contract between the parties, but it is a much more open question as to whether there was an express oral agreement.

	It is plain the Industrial Tribunal found it of considerable significance that Mr Hudson, at the outset of this relationship with the respondents, had insisted that he should not be treated as a self-employed person, but as an employed person. But having attached significance to that finding, they then made no finding as to what the respondents’ response was to Mr Hudson’s insistence. If the respondents did agree they would treat Mr Hudson as an employed person, Mr Beaney says that would have been a crucial finding. Mr Grundy says that may well be the case but it would have been just one of the factors the Industrial Tribunal would have had to take into account. It would not be a crucially determinant factor.

	It seems to us that the Industrial Tribunal failed to make a finding about what was the respondents’ response to the applicant’s insistence he be treated as employed, or that they failed to take it into account if they did make a finding; or it might be that they failed in both respects to make a finding and/or take it into account.

	Paragraph 5 of their decision sets out the factors the Industrial Tribunal thought indicative of Mr Hudson of being an employed person. It is quite plain that whilst they took into account the fact that he had insisted on being an employed person, they made no finding at all, or if they did, did not make any assertion in that paragraph of the fact that the respondents had either accepted or rejected this plea. It is our view that a finding in this respect would have been a critical factor when determining the nature of the relationship between the parties.

	We refer again to the case of Massey and we accept what Mr Beaney says namely that such a finding would have been crucial and it had to be taken into account. The fact that the Industrial Tribunal apparently made no such finding as to the respondents’ response and therefore did not take it into account, is, in our judgment, an error of law. Just how important that would be, is not for us to decide. It is a factor, a very important factor, for a tribunal to take that into account before coming to its conclusion about the status of Mr Hudson.

	In our judgment, the fact that they failed to make a finding as to the respondents’ response amounts to an error of law. Accordingly, we feel that the matter must be referred to a freshly constituted tribunal to make findings about this. It is not a matter which we, as an appellate tribunal, can put right.

	Accordingly, we allow this appeal.